The New Zealand dollar fell after the US unveiled a list of US$200 billion of Chinese imports facing a new 10 percent tariff prompting China to say it will be forced to retaliate and revive fears of a trade war.

The kiwi traded at 68.09 US cents as at 5pm in Wellington from 68.45 cents late yesterday. The trade-weighted index was at 72.79 from 72.85 yesterday.

US Trade Representative Robert Lighthizer today said the president ordered his office start work on imposing additional tariffs to the US$34 billion of Chinese imports that kicked in on Friday, as a response to China's retaliation, something he said China had "no justification for". Lighthizer said the US had "patiently urged China to stop its unfair practices, open its market and engage in true market competition". The latest tariffs are less than the 25 percent levy that began last week. An escalating trade dispute may be negative for currencies of trading nations such as Australia and New Zealand.

The kiwi "sank like a stone" when news headlines about the latest tariffs crossed trader screens this morning, said Imre Speizer, head of NZ strategy at Westpac Banking Corp. Fears of a trade war have been on the radar of the currency market for some time now and both the kiwi and Aussie dollars suffered when it intensified but until this morning there had been "a bit of a hiatus of headlines. Now we've got the risk of a trade war rising again with China saying it will be forced to hit back."

Speizer said the New Zealand dollar may fall below 68 US cents for the first time this week "as the European and US markets come in to see the trade war back on again."

The kiwi dollar traded at 75.60 yen from 76.09 yen late yesterday, with Japan's currency, typically seen as a safe haven for investors. New Zealand counts China as its biggest trading partner and the US as its third-biggest. The NZ currency rose to 4.5367 yuan from 4.5190 yuan yesterday and rose to 91.85 Australian cents from 91.63 cents on expectation Australia is more exposed to the Chinese economy.

The kiwi traded at 51.35 British pence from 51.70 pence late yesterday, having strengthened on the cross following resignations in the British government over PM Theresa May's Brexit strategy. Concerns about the UK government "are a local pound issue now," Speizer said.

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